Oil Price Manipulation?

[Flynbyu]

NEW YORK (CNNMoney.com) -- Amid soaring oil prices that some say are caused by nothing more than rampant speculation, the government Thursday announced a wide ranging probe into oil price manipulation and said it would get more information on the effect investors are having on the market.

The measures, undertaken by the Commodity Futures Trading Commission after pressure from angry lawmakers, do two things.

First, they'll attempt to gather more information from index funds and other non-commercial users of oil. They'll also seek information on oil trades made outside the U.S. on exchanges like the IntercontinentalExchange Europe (ICE) where the CFTC has no oversight and has been unable to get more detailed information.

The second thing on the CFTC's agenda is an actual investigation into possible price manipulation - most likely by a commercial user of oil like a production company, shipping company, or storage company.

Information gathering
Recent investor interest in commodities is an issue of intense debate. Some say investors, who have been funneling money into oil and other commodities over the last several months amid rising inflation and falling stock prices, are unjustifiably driving up the price of oil and gas simply because they have no other place to put their money.

Others say tight supply and strong demand are the real reasons behind this investor interest, and the market is functioning properly to limit demand and increase supply.

CFTC has previously said that it has not found any evidence that speculators were artificially inflating prices.

"Data used by Commission staff show that price changes are largely unrelated to fund trading," according to written testimony before a Senate hearing earlier this month by CFTC Chief Economist Jeffrey Harris. "Broad-based manipulative forces are not driving the recent higher futures prices in commodities across-the-board."

Neither Harris nor any other economist at the CFTC could not be reached for comment.

According to a chart presented in its congressional testimony, it appears the CFTC used data from 2007 to reach its conclusion.

Additional reporting by index funds and other non-commercial buyers of crude will help CFTC make better analysis, said Michael Haigh, head of U.S. commodities research at the investment bank Société Générale and a former economist at the CFTC.

Even so, he doesn't expect the CFTC's overall conclusion - that investors aren't unjustifiably driving up oil prices - to change much.

More regulation on the way?
But Haigh said oil traders see this request for additional information as perhaps a precursor to broader regulation, like decreasing the amount of contracts speculators are allowed to hold or raising the amount of money investors have to put down to buy those contracts.

"The fear that this might happen may drive people out of the market," he said. "There could be a run for the gates."

Oil prices fell Thursday by over $4, one of the biggest declines in recent weeks. One expert attributed the slide to the investigation.

"The traders now know that someone is looking over their shoulder," said Michael Greenberger, a professor at the University of Maryland and a former CFTC official. "Their phony sales are being watched, and in one day there was the biggest drop in 2 1/2 months."

If there is a run for the gates, Haigh said prices may or may not fall, but liquidity would be reduced, leaving the market more vulnerable to manipulation by a single participant.

Possible manipulation
And that's the second thing the CFTC is looking into - "practices surrounding the purchase, transportation, storage, and trading of crude oil and related derivative contracts," the agency said in a statement.

This most likely means manipulation of the physical oil market, not typically done by speculators but rather by commercial players who might literally withhold oil from the market in an attempt to drive prices higher.

The CFTC has found evidence of this in the past. BP recently settled a suit that alleged the company tried to corner the propane market to inflate prices in 2003 and 2004. BP agreed to pay a $303 million settlement.

Haigh thinks it's likely CFTC will find evidence of this again given that the agency has been investigating for six months and has now chosen to make it public. But he stressed that a single player acting alone would in all likelihood not have a huge influence on prices.

"It's difficult to imagine a price runup of $90 to $135 being done by one entity," he said.

He believes the CFTC took the unusual step of announcing the investigation to placate angry lawmakers who may be tempted to enact broader regulations on the oil futures market that would hamper trading.

One analyst said the CFTC investigation will have little effect.

"This investigation is just a way for the government to divert attention away from the fact that it hasn't created a viable energy policy," said Mike Fitzpatrick, an analyst at the brokerage MF Global in New York. "Ultimately, fundamentals rule the markets...this investigation is going to wind up producing nothing."

Not everyone agrees fundamentals rule the market.

"There is a theory that the price of crude oil is being driven up not by supply and demand principles, but by speculators using what are called dark markets, markets that can't be watched by the public or regulators, to manipulate the price of crude," said Greenberger. 

First Published: May 30, 2008: 2:57 PM EDT

Oil prices: Wall Street's game

Is $130 oil a bubble?

Story via CNNMoney.com

~Brian

[Gaber]

All speculation BS....makes me sick.  Read this:


Don't blame those 'greedy' oil companies

"As you fill your gas tank for your next summer trip, ask yourself how gas prices have reached current nosebleed levels. For many, the easy answer is to curse the "greedy" oil companies. Consider for a moment an alternative reason.

Oil is a commodity and therefore is subject to the laws of supply and demand. In the simplest of terms, when demand begins to put pressure on supply, prices go up; simple Econ 101. In a supply-and-demand situation, there are really only two options; lower demand or increase supply. I don't anticipate that the demand for oil will decrease, as Americans love their cars and love to drive. This leaves us with increasing the supply.

I know there are other fuel and energy alternatives, but none are mature enough or as readily accessible as oil and its byproducts at the present time. They may be in the future, but that doesn't help us out at the gas pump today. While research and development of fuel and energy alternatives will and must go forward, the supply of oil in the interim can be increased and America has vast resources that can be tapped into today.

Blocked in D.C.
Investors Business Daily estimates there are 1 trillion barrels of oil trapped in shale in the U.S. and Canada. Retrieving just a 10th of it would quadruple our current oil reserves. There is a pool of oil in the Gulf of Mexico that is estimated to be as large as any in the Middle East. There is an equally large pool believed to be in Alaska."

The Chinese are attempting to tap into the Gulf oil supply by drilling diagonally from Cuba. I wonder what environmental safeguards they are using?

The fact is that there are environmentally safe methods of extracting oil from shale and drilling in both the Gulf and Alaska. Congress, however, continues to block these efforts. Just last week, the Senate voted to block any extraction from shale in Colorado. In essence, they voted to make your trips to the gas station more expensive, to make air travel more expensive, and to make heating your home more expensive.

That's something to think about in an election year."

http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd17/P1/HighIQjournal20080524.aspx

We've got enough OIL to last for a very very very long time and drive the price right back down, but we have a few obstacles in the f'n road. 

[realdeal]

http://hermancain.com/news/press-opinion-052608.asp

[Flynbyu]

Of course it's speculation, but it is under investigation.

~Brian

[realdeal]

CNN is too left to cover stories IMO. They are one sided about stuff.


here is from boortz.com

FED UP --- I'M MAKING THE SWITCH .... TO FOX.

I've mentioned many times that I generally watch CNN in the mornings while I'm preparing for my program.  Fox News Channel is definitely my first choice throughout the rest of the day, but that morning coffee-klatch "Fox & Friends" bit is just too much for me to stomach.  Until now.

My first 30 minutes of watching the morning news is generally spent in the workout room.  That would be the first 30 Minutes of CNN's "Daybreak" with Carol Costello.  During that first thirty minutes of CNN watching this morning I saw the following:

1.  They ran a story saying that House Republicans had "abandoned" its plans to push for drilling in ANWR.  During that report CNN showed video of Alaska that most definitely was NOT taped in Section 1002 of ANWR.  Snow-capped mountains, rolling grasslands with rushing streams .. this is not ANWR Section 1002.  They even ran video of tourists enjoying a white-water rafting trip.  This is not ANWR Section 1002 ... so why did CNN run these videos?  Simple .. because they know that only a very small percentage of Americans realize that the portion of ANWR which has been specifically set aside for oil exploration, known as Section 1002, is not what you would call picturesque.  In the winter it resembles a frozen-over Wal-Mart parking lot.  Capitalizing on this ignorance CNN tries to put forth the image that exploration in Section 1002 would ravage beautiful countryside and interrupt tourist rafting trips.

2.  Then CNN runs a story from Paris.  Almost 485 cars were torched last night in the City of Lights.  The CNN reporter told us that the violence was being caused by "disadvantaged youth who have been rioting."  Not one single time in the entire report did CNN mention that these rioters were Muslim.  Why?  Well, maybe it's just political correctness.  Then again, maybe their goal is to soften any language that might alert Americans to the fact that the Islamic radicals are still out there, and that they are, in fact, making some rather astounding headway in their efforts to bring the Western world to its knees under Islamic culture and law.

3.  Plus, we have the continuing CNN coverage of what they would most certainly like us to believe is a huge scandal over oil company profits.  Again, not once did any CNN expert or reporter make any mention of oil company profit margins or price-to-earnings ratios.  Instead, they just made references to "windfall" profits.  In addition, their entire coverage during that first report centered on what the oil company executives were making.  Nothing about supply and demand.  Not one segment that could be construed as informational as to how the free enterprise system works.  Just "windfall" profits and evil oil executives making tons of money (but still less than Oprah makes).

So ... as soon as I got off the ellipse machine and took my shower, I walked into my office and put on Fox & Friends.  I'm going to give them a try for a few days.  Giggly sometimes?  Perhaps so.  But maybe they won't make the leftist agenda quite so obvious.





Ive tried searching briefly for some other stuff but i have heard lots of it since the war started on how negative and left they are..

[Jester2893]

I thought the reason for the oil prices was because of the war? We are using so much oil moving the vehicles thats its make it go up.

[Flynbyu]

I thought the reason for the oil prices was because of the war? We are using so much oil moving the vehicles thats its make it go up.

Well, that's part of it.

OPEC doesn't like the US  making war on Arab lands. It spiked in 1990 when the Iraq war first went down....$1.35. It spiked on the second, and it has went up and up from there.

~Brian

[socalrappy700]

I thought the reason for the oil prices was because of the war? We are using so much oil moving the vehicles thats its make it go up.

Well, that's part of it.

OPEC doesn't like the US  making war on Arab lands. It spiked in 1990 when the Iraq war first went down....$1.35. It spiked on the second, and it has went up and up from there.

~Brian

Right now it has nothing to do with it.  OPEC has had a ton of pressure from China and the US to keep pumping more and they are way over 110%.  They have been working with us and china to try to curb the broblem.  But they can't keep up with the demand.  The demand in the world is higher then it has ever been.  That is the reason.  We need to back off our use of oil and find something to replace it.....and not CORN!

[Jester2893]

But the demand has gone up because we are fighting the war. They use a good chunk of gas transporting the vehicles of our army.

For me, even though this may be over my head. I don't see why prices are so high. It seems like we have enough gas, but will eventually have to switch to different fuels.

[socalrappy700]

But the demand has gone up because we are fighting the war. They use a good chunk of gas transporting the vehicles of our army.

For me, even though this may be over my head. I don't see why prices are so high. It seems like we have enough gas, but will eventually have to switch to different fuels.

The use of fuel for the war can't even count as a drop in the bucket.  The demand is so high right now, and its even worse in India and china.  We can't make fuel fast enough to keep up with the demand.  Damn epa makes it a pain in the butt for the gas companies to build a new refinery.  I can't remember when the last one was built.....but its been a long time.  Bottom line, too much demand.....not enough gas.

[Flynbyu]

Watch and see.

If and when we pull out of the the Gulf, and the price will go back down a little. China was booming 5 years ago when we jumped into Iraq and the price for a barrell of crude was $50.

Weak ass dollar is a big reason it is expensive, since futures are traded in US currency, the dollar is very weak compared to the Pound and EURO.



~Brian

[socalrappy700]

Watch and see.

If and when we pull out of the the Gulf, and the price will go back down a little. China was booming 5 years ago when we jumped into Iraq and the price for a barrell of crude was $50.

Weak ass dollar is a big reason it is expensive, since futures are traded in US currency, the dollar is very weak compared to the Pound and EURO.



~Brian

We need to start being a contender on the world market.  They are killing us and that's driving the dollar down.  And yes, China was booming then.  The only problem is that their use has gone through the roof since then.  And now India is really picking up too.

[Flynbyu]

Watch and see.

If and when we pull out of the the Gulf, and the price will go back down a little. China was booming 5 years ago when we jumped into Iraq and the price for a barrell of crude was $50.

Weak ass dollar is a big reason it is expensive, since futures are traded in US currency, the dollar is very weak compared to the Pound and EURO.



~Brian

We need to start being a contender on the world market.  They are killing us and that's driving the dollar down.  And yes, China was booming then.  The only problem is that their use has gone through the roof since then.  And now India is really picking up too.

Sure.

The dollar is hurting in part due to our economy. We need to be doing it for less and better, but it won't happen because of our living standards here.

~Brian

[socalrappy700]

Watch and see.

If and when we pull out of the the Gulf, and the price will go back down a little. China was booming 5 years ago when we jumped into Iraq and the price for a barrell of crude was $50.

Weak ass dollar is a big reason it is expensive, since futures are traded in US currency, the dollar is very weak compared to the Pound and EURO.



~Brian

We need to start being a contender on the world market.  They are killing us and that's driving the dollar down.  And yes, China was booming then.  The only problem is that their use has gone through the roof since then.  And now India is really picking up too.

Sure.

The dollar is hurting in part due to our economy. We need to be doing it for less and better, but it won't happen because of our living standards here.

~Brian

yeah, thats the hard part.  The union guy pushing the broom needs 52.00 an hour. 

We need to find something they need and don't have.  We can charge the shit out of them.

[Flynbyu]

We have wheat, we have corn, and we produce a shitload of beef and poultry. I would adjust the shit out of those items to trade oil for, but it hurts the poor countries that don't have anything to trade.

~Brian